Commentary: Paul Ebeling on Wall Street

Commentary: Paul Ebeling on Wall Street


FLASH: Earnings season in full swing on Wall Street, and it likes what it sees, the bias is Bullish and the Fed is hobbled by President Trump.

This week we will see earnings reports from: FCF, HOG, SNAP, AMTD, MSFT, TSLA, and many more.

Leadership is strong enough to power new Northside moves. Then up to the market dynamics and earnings to decide the next move, either a break higher on surprising results or a test back from here if sellers come in like thy did last Wednesday.

Corporate earnings results of this reporting season are beating expectations by a wide margin, suggesting that the S&P 500 (SPY) will avoid a “profit recession” this year because predicted economic bad news has failed to materialize.

That is a reversal of the outlook from a few months ago, when the Y 2019 profit outlook appeared to be getting worse. Earnings already faced tough comparisons with last year, when The Trump Tax code overhaul provided a big boost.

This Quarter could be the bottom for this mini down cycle, as the market is now expecting to see earnings stabilize. Eventually, as the global story gets better earnings will help drive the market further North this year.

So far the aggregate profit forecast has improved from an estimated Y-Y decline of 2.5% a week ago to an expected decline of just 1.7% as of Thursday, according to IBES data from Refinitiv.

The average earnings surprise so far is higher than what is typical, the earnings surprise factor for the 77 S&P 500 companies that have reported is 6.1%, the highest in 3 years.

The average earnings surprise for an entire earnings period since Y 1994 is 3.2%, based on Refinitiv’s data.

Moreover, 78% of the companies reporting have beaten estimates on EPS, above the amount at the same time last Quarter.

The data underscores the view that S&P 500 companies will end up posting an increase in Y-Y earnings for Q-1, and that a profit recession defined as 2 straight Quarters of Y-Y earnings declines. That supports Shayne’s and my argument that this Bull market in stocks will continue to extend since earnings drive stock prices.

Tune out the Noise!

The last S&P 500 earnings recession ran from July 2015 to June of 2016.

HeffX-LTN’s overall technical outlook for the SPY is Bullish to Very Bullish at the week ended 19 April 2019.

Remember, pay attention, it is your money, so your responsibility and always take what the market gives.

The Bulls Vs The Bears

Sentiment Indicators

VIX: 12.09; -0.51 
VXN: 15.15; -0.71 
VXO: 12.04; -0.54 

Put/Call Ratio (PCR) CBOE: 0.88; +0.07.

Bulls rose as the Bears faded on the week

The Bulls are at: 54.8 Vs 53.9 last

The Bears are at: 19.2 Vs 19.2 last

Support and Resistance

HeffX-LTN’s overall technical outlook for the major US stock market from the support and resistance perspective is Bullish to Very Bullish in here.

Have a terrific week.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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